Luxury real estate, political donations, investments, and magazine covers. A year ago, that was the life of Sam Bankman Fried, Assistant US Attorney Thein Rhine noted during opening statements in the world’s most high-profile cryptocurrency trial.
“It’s all built on lies,” Ren continued, claiming that the Alameda Research and FTX co-founder “lied to the world” to get richer and increase his influence through lobbying in Washington, D.C. Ren’s statement appears to have even influenced Bankman-Fried’s statements. The defense attorney responded with a lukewarm note. His lawyer, Mark Cohen, portrayed his client as a businessman who made mistakes during times of rapid growth. “There was no robbery,” he told jurors.
At the exhibition, the journalists and lawyers included Joseph Bankman and Barbara Freed, the defendant’s parents. While Joseph smiled occasionally over the past few days, Barbara stared at her son in Courtroom No. 26 for hours.
Four witnesses testified this week at the trial in U.S. District Court in Manhattan. The list includes a French trader and FTX investor, along with Adam Yedediah and Gary Wang, former close friends of Bankman-Fried.
Highlights of the Bankman-Fried trial were covered by Cointelegraph on the ground.
The prosecutor’s first witness before the jury was a cocoa merchant from Paris, who currently lives in London. Mark Julliard was one of the victims of the FTX debacle in November 2022. Julliard told jurors that he had four bitcoins in FTX, worth approximately $100,000 at the time. He indicated that he felt anxious after trying to withdraw money without getting a return.
At FTX, he never traded futures. The Bitcoin stake was a large part of Juilliard’s savings. Prosecutors used his testimony to show how customers who trusted FTX with funds had been harmed since last year’s events.
Bankman-Fried’s defense tried to downplay prosecutors’ arguments, saying the trader was a licensed professional in London and did not make decisions based on celebrity endorsements. Cohen noted that there was nothing wrong with hiring Tom Brady to run an ad for FTX.
Adam Yedediah and Bankman-Fried became friends at the Massachusetts Institute of Technology (MIT). Before joining FTX as a developer in January 2021, Yedidia briefly worked at Alameda in 2017 as an intern. He was also one of the residents of the $35 million luxury FTX estate in the Bahamas.
According to his testimony, FTX received paper money from customers through an Alameda subsidiary called North Dimension. Every deposit made by a FTX customer was considered a debt owed by Alameda to FTX. At the time of the stock market crash, these liabilities amounted to $8 billion.
Jedediah learned about the billionaires’ debts between companies months before they filed for bankruptcy. “Are things OK?” Yedidia Bankman asked Fried during a tennis court, citing Alameda’s responsibility, but did not receive a positive response. “We are no longer bulletproof,” Bankman-Fried told him, adding that it would take companies six months to three years to settle their accounts. “He seemed nervous,” Jedediah recalls.
“I trusted Sam, Caroline and others in Alameda to handle the situation.”
Until the November collapse, Yedidia saw FTX dominate its competitors, Binance and Coinbase. He even spent his million-dollar bonus to acquire a 5% stake in the company.
Jedediah resigned in November 2022, after learning that Alameda was using money sent from FTX clients to pay off its debts. He has been cooperating with the US Department of Justice since last year.
Matthew Huang, co-founder of venture capital firm Paradigm, invested a total of $278 million in FTX in two funding rounds between 2021 and 2022. For him, this was a complete loss.
According to Huang, the company was not aware of the mingling of funds between FTX and Alameda, nor of the privileges Alameda enjoyed on the cryptocurrency exchange. Alameda was exempt from the FTX liquidation engine, which closes positions at risk of liquidation, as demonstrated by evidence presented by prosecutors from the FTX code and database.
Under the exemption, Alameda was able to leverage its position and maintain a negative balance with FTX.
Huang admitted to not conducting deeper due diligence on FTX, instead relying on information provided by Bankman-Fried.
— Cointelegraph (@Cointelegraph) October 5, 2023
As Huang put it, Bankman Fried was “very resistant” to the idea of having investors on FTX’s board, but pledged to build a board and hire experienced executives.
Wang and Bankman-Fried, co-founders of two prominent companies, found themselves on opposite sides of the courtroom this week. “I’m here because I committed wire fraud, securities fraud, commodity fraud,” he told jurors, adding that he was also involved in the conspiracy alongside Bankman-Fried, Caroline Ellison – the former CEO of Alameda Research – and Nishad Singh. Former engineering manager.
“I’m here because I committed wire fraud, securities fraud, and commodity fraud.”
Wang is considered a key witness in the case. The prosecution began his investigation on October 5, and is scheduled to end on October 10, when the second week of the trial begins. Wang provided a deeper look into how FTX and Alameda operate under Bankman-Fried.
Wang said that in 2019, a few months after FTX was founded, Alameda was granted special privileges over the FTX token. Based on screenshots of the FTX database and its code on GitHub, prosecutors showed that Alameda had an unlimited negative balance, a $65 billion special line of credit, and liquidation exemption.
Bankman-Fried’s defense attorney argued that these concessions were similar to those received by other market makers at FTX. The defense also pointed to the fact that Alameda was the primary market maker in FTX; Thus, the ability to have a negative balance was essential to her role.
According to Wang, the mixing of funds between companies has grown over time. In 2020, Bankman-Fried instructed Wang to maintain a negative Alameda balance within FTX revenue. Alameda’s negative balance rose, as did its credit limit with FTX. Alameda’s liability for FTX peaked at $3 billion in late 2021 from $300 million in 2020.
“I trusted his judgment,” Wang responded when asked why he supported the Alameda franchises.
Prosecutors also highlighted the MobileCoin (MOB) exploit in 2021. In an attempt to hide the loss from FTX investors, Bankman-Fried allegedly asked Wang and Ellison to add the millionaire’s deficit to Alameda’s balance sheet instead of keeping it on FTX’s financial statements.
Another major revelation is that the FTX Insurance Fund had manipulated the data, Wang said.
In the months before FTX’s collapse, Bankman-Fried, Wang, and Singh discussed the possibility of closing Alameda and replacing it with other market makers. However, at the time, the company’s liabilities to FTX amounted to $14 billion. In November 2022, Alameda ceased operations.
Wang is also cooperating with prosecutors. His testimony will resume on October 10. Caroline Ellison will also be heard on the same day.
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